Designing your offer isn’t the hardest part. The biggest trick is guessing the redemption rate = the percentage of people who accurately use your coupon.
You make the stakes when you use big offers, which makes them riskier to forecast. I love when clients say it worked for them “pretty well,” good luck pal I bet they don’t have a clue about the response!
So, what to do? Test a small market for your product, then gather some real data about how it works. Follow up by training your staff to make the right question and gather the right information from the response.
On average in North America, customers redeem a little over 3% of coupons (and the average coupon offers are around 50 cents off the list price). You can use these statistics as a good starting point for your estimate, but the range is wide, some offers are so appealing, and so easy to use, that customers redeem 50% of those coupons. For others, the redemption rate can be close to zero.
To forecast whether your coupon will have a high or low redemption rate, compare your offer to others. Are you offering something more generous or easy to redeem than you have in the past? Is it better than your competitors? If so, you can expect a positive and higher redemption rates; maybe twice as high or higher.
If you’ve ever used coupons before, your company should have rich information about response rates. Just make sure you examine past offers carefully to pick ones that truly match the current offer before assuming the same response rate can be repeated. If you’re switching your medium, for example, from newspapers or flyers to the web, then do a test first, because the redemption rate may be very different when you start dabbling with different mediums.
Mathematical formulas for estimating the effect of a discount or coupons offer are out there, but they’re complex and difficult to use. Instead, give us a call we‘ll make your life easier. After all, it’s our bread and butter.